absorption vs variable costing

Discussion Topic 1: Absorption vs. Variable Costing

In this week’s discussion, we will examine the effects of absorption costing and variable costing on net income.

Harris Company’s fixed overhead costs are $4 per unit, and its variable overhead costs are $8 per unit. In the first month of operations, 50,000 units are produced and 46,000 units are sold. Write a short memo to the chief operating officer explaining which costing approach will produce the higher income and what the difference will be.

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